It is possible to transfer your defined benefit (DB) pension. If you are approaching retirement and are ready to access your benefits, your options are to either:
You can choose to transfer all of your benefits or just any Additional Voluntary Contributions (AVCs), as long as it’s in line with the rules for your specific pension section. Please see our read as you need guide here for more details.
Transferring your pension does, however, carry significant risks. You should carefully compare the benefits of your current pension with any alternatives before making a decision.
If you’re currently paying into a DB section of the RPS and want to transfer into or out of the Scheme but aren’t yet ready to take your benefits, you can find more information here.
The main benefit of your defined benefit pension is that it will pay you a regular income until you die – no matter how long you live – as well as a regular income to a surviving spouse or dependant. By giving this up now, you’re trading a guaranteed income for life, for a sum of money that could run out, leaving you with nothing.
If you transfer from a DB scheme to a defined contribution (DC) arrangement, you:
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For these reasons, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) both believe that it will be in most people’s best interests not to transfer their DB pension. You can read more about when a transfer may or may not be suitable on the FCA’s website here.
You must provide documents or ‘evidence’ that the scheme you want to transfer to is suitable and secure. The government introduced these rules in November 2021 to help protect members from unsuitable or insecure transfers. You can find out more here.
You may be thinking of transferring from a DB scheme to a DC scheme to get more choice around how, and when, to take your pension benefits.
Transferring your defined benefits out of the Railways Pension Scheme, to have direct access to your money, may not produce the best retirement outcome for most members. But for some members, it could.
You should think carefully about the benefits you’d be giving up if you went ahead with it. You should consider speaking to an independent financial adviser before making any decisions (see ‘The importance of getting advice’ section below).
Transferring from your defined benefit pension might not be a bad idea if…
With a DC arrangement you can usually take your pension pot from age 55 and can then:
This broader range of options for DC schemes was introduced as part of the Government’s ‘pension freedoms’ in 2015.
If you’re transferring out to access your money earlier, remember that only the first 25% is tax-free. So you’ll have to pay tax on 75% of the fund when you take your benefits.
If you decide that transferring to a DC arrangement is right for you and you are interested in drawdown, the Trustee of the RPS has appointed Legal and General Investment Management (LGIM) to offer members access to a drawdown facility. You can find out more about how it works here.
Transferring your pension is a big decision and one that may benefit from independent financial advice.
You might have to do this by law if the value of your DB benefits is more than £30,000 and you are looking to transfer to a Defined Contribution/Personal Pension Arrangement.
But it could still be beneficial to obtain advice even if you pot is worth less than that.
The same applies if you have a DC pension pot (which contains a guarantee of the benefit you may get – known as safeguarded benefits).
Liverpool Victoria (LV) has been chosen as the official partner to give RPS members access to financial advice. LV can be contacted on 0800 023 4187. You can find out more about the advice service here.
You are still free to choose your own Independent Financial Adviser (IFA). You can find an IFA in your area at unbiased.co.uk.
Pension transfers are one of the main routes being used by pension scammers.
Their tactics include:
If you fall prey to these fraudsters, you could lose your entire pension savings and be asked to pay a large tax bill too.
We recommend that you read and consider all available guidance before proceeding with a request to transfer your pension.
If you are considering transferring your pension then you may benefit from financial advice. You might also have to do this by law if the value of your DB benefits is more than £30,000 and you are looking to transfer to a Defined Contribution/Personal Pension Arrangement.
In November 2021, the government introduced new regulations to protect pension scheme members against unwise or illegal transfers.
The new regulations help to protect you from scams. Depending on the type of the scheme you want to transfer to, you may need to provide ‘evidence’ or information to help us work out how safe the transfer is. Trustees can refuse transfers where there's a greater risk it may be part of a scam. You can learn more about what we need here.
If you do decide to transfer out of your DB pension scheme, then the process will be as follows:
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